SAN FRANCISCO, California, April 16, 2009—California faces a shortage of nearly 1 million college graduates in the year 2025, a report by the Public Policy Institute of California (PPIC) concludes. But this education skills gap—between the number of graduates the economy needs and the number California can produce—could be cut in half if the state makes modest improvements in college attendance, community college transfers, and college graduation rates.

Unless state decisionmakers implement policy changes to enroll and graduate more students before 2025, only 35 percent of working-age adults will have a bachelor’s degree—in an economy expected to require that 41 percent of its workers be college educated.

“California faces a critical challenge,” says Hans Johnson, PPIC associate director and senior fellow, who co-authored the report with Ria Sengupta. “But the good news is the state can dramatically improve the prospects for its economic growth and the futures of its young adult residents with relatively modest investments in the pathways students take to college graduation.”

At a time when the economy is increasingly demanding more highly educated workers, California’s public higher education system—which 86 percent of the state’s college students attend—lags behind many other states in graduation rates. In 1960, California ranked eighth in the nation in the share of adults 25 to 34 years old with a bachelor’s degree. By 2006, it had fallen to 23rd place. Economic projections show that demand for college graduates will continue to rise sharply, but if current trends continue, the share of college-educated adults with bachelor’s degrees in the state will increase only very slightly and will not keep pace with demand.

Two strong demographic forces account for this lack of progress: the retirement of the large and relatively well-educated baby boom generation and the population shift toward groups with historically low rates of college attendance and graduation—Latinos in particular. Cuts in higher education funding precipitated by the current state budget crisis would only make it more difficult to increase the number of college graduates.

The PPIC report, Closing the Gap: Meeting California’s Need for College Graduates, lays out a scenario that would increase the number of college graduates by more than 500,000, closing the education skills gap by half. The report points to past increases in graduation rates in the public higher education system and the experience of other states as evidence the goal can be achieved. The scenario calls for improvements in three educational pathways:

Graduation from the California State University and University of California systems. The state’s public universities award most of the degrees granted in California. With 349,000 students in 2007, CSU had more than twice as many undergraduates as UC. But while about four of every five UC students graduates within six years, only about half of students in the much larger CSU system do so. Raising the CSU graduation rate from 50 percent to 62 percent and increasing the UC graduation rate by 4.8 percent to 85 percent could increase the number of college graduates by more than 200,000 by 2025. Increasing graduation rates is also a promising fiscal approach. The state has already invested in these students’ higher education, and keeping them in college a bit longer is less expensive than other options that would require at least four full years of funding.

Transfers from community colleges to four-year institutions. Because of the sheer size of California’s community college system—1.6 million students in 2007—relatively small changes in transfer rates could significantly affect graduation rates from four-year colleges. And there is considerable room for improvement. More than 70 percent of the state’s public higher education students attend a community college, but only 20 to 30 percent of those seeking to transfer to a four-year institution manage to do so. Increasing the transfer rate by 22 percent would add more than 100,000 new college graduates by 2025.

College attendance. California ranks 40th among the states in the share of high school graduates who go directly to college, with only 55 percent going on to any college the following year. Gradually raising the first-time college attendance rate to 61 percent—the national average—would increase the number of college graduates by more than 100,000 by 2025.

Key obstacles to college attendance and graduation are costs and a lack of academic preparation. At a time when total expenses for students who live on a UC campus are about $25,000, college costs present a hardship for many families, and other research suggests that improved financial aid can increase the likelihood of students staying in college. To improve academic preparation, better evaluations are needed to assess whether students are ready for college-level work, as well as strategies to help them if they are not.

The report was supported with funding from The William and Flora Hewlett Foundation.

ABOUT PPIC

The Public Policy Institute of California is a private, nonprofit organization dedicated to informing and improving public policy in California through independent, objective, nonpartisan research on major economic, social, and political issues. The institute was established in 1994 with an endowment from William R. Hewlett. PPIC does not take or support positions on any ballot measure or on any local, state, or federal legislation, nor does it endorse, support, or oppose any political parties or candidates for public office.